Buy BPCL; target of Rs 370: Emkay

Emkay's research report on BPCL

BPCL posted better than expected performance in Q1FY25. SA EBITDA/APAT fell 40-45% QoQ each to Rs56.5/30.1bn, but was a 19%/35% beat. Reported GRM stood at US$7.9/bbl vs our estimate of US$7.0/bbl. Implied marketing margin saw an 8% miss at ~Rs4.9/kg, but was offset by an 8% lower opex runrate and Rs4.1bn of inventory gains. LPG buffer turned negative at Rs20.2bn as of Jun-24-end vs. positive QoQ. SA net debt was near-Nil. Mgmt indicated margin comfort at US$80-85/bbl for crude, and expectation of better refining spread ahead which should support its capex program and its aim to double profit by FY30. Also, LPG compensation is awaited.

Outlook

We retain our positive stance on OMCs led by stable marketing outlook. We largely retain FY25-26E earnings and maintain BUY on BPCL, rolling over Sep-25E TP of Rs370/share.